Mortgage Debacle: How bad is it?

The latest victim in the Mortgage Debacle is Merrill Lynch, a powerful investment house. Last week, the company wrote off $ 8.4 billion and took a third quarter loss of $2.3 billion.

The action of the company's CEO, E. Stanely O'Neal, indicated that the situations may be quite desperate. Mr O'Neal went on his own to talk about merger with rival bank Wachovia. It emerged on Friday that O'Neal had telephoned Ken Thompson, the chief executive of Wachovia, to suggest a merger days before Merrill disclosed the worst quarterly loss in its 93-year history. Thompson was reportedly lukewarm on the possibility of striking a deal.

In reaction, the board of directors of the company announce Mr. O'Neal's departure. It emerged that Laurence D. Fink, chairman and chief executive of BlackRock, was described as a leading candidate to replace Mr. O’Neal.

The street is not sure of how deep hole is Merrill Lynch's problem with the mortgage investments. The Wall Street's banks have written down some $30bn on sub-prime mortgages.

As a result of the debacle, Wall Street went on a cleansing mission. Some of the high profile cleansing are, Warren Spector, the number two at Bear Stearns; Bear Stearns chief executive Jimmy Cayne, is now under pressure to stand aside.

Chuck Prince, the Citigroup chief executive, is also under fire who has already cleansed the senior management in his fixed-income business .

Whats next for troubled Wall Street? Are Asian banks are up to grab prime American banking assets?